Will the Whirlpool case wash?

Send to a friend Print

Angus Kidman13 September 2007, 4:49 AM

Prominent lawyers say lawsuits of the type taken by Queensland software company 2Clix's lawsuit against Whirlpool founder Simon Wright are a long shot at best.

With no existing case law in Australia on liability in Internet forums, the stakes are high for publishers, consumers and corporations alike.

Queensland-based accounting software firm 2Clix has sued Simon Wright, founder of Whirlpool, seeking damages of $150,000 (plus costs) and the permanent removal of two threads on the site discussing the company's products.

News of the legal action has prompted widespread coverage of the suit, including prominent discussions on international sites such as Digg and Slashdot, and a whole series of fresh discussion threads on Whirlpool itself.

This is quite possibly not the outcome sought by 2Clix, which argues in its statement of claim that it has suffered "irreparable damage to its trade and business" from the existing two threads.

"Whirlpool believes the action has no merit and will defend the matter vigorously, despite being a community website with little resources," a note on Whirlpool's front page reads.

Numerous Whirlpool participants have pledged to donate money to help fight against the action, although exactly how Wright will respond to the suit is not clear (he must give notice of intent to defend against the action within 28 days).

Internet watchers are already concerned by the development. "This action is an attack on freedom of speech and the ability of consumers to engage in legitimate online criticism. One of the great benefits of the Internet is that it allows consumers to become better informed, by searching for information about products or services," Electronic Frontiers Australia chairperson Dale Clapperton said in a statement.

"If negative comments about poor quality goods or services can't be published for fear of a lawsuit, consumers will be unable to properly inform themselves."

If the action goes to trial, the case is likely to set an important precedent. There are no prominent examples of cases which indicate responsibility for postings made anonymously on Internet forums, according to Leanne Norman, a partner with Freehills specialising in defamation and related matters. (Norman is not involved with the Whirlpool case.)

"It would be clear that if you could identify the person who posted the message, that person would be liable to be sued," Norman told APC. "No question about that. [But] there are real difficulties identifying such people," she noted.

Even with a preliminary discovery application, details such as IP addresses can't always reliably be associated with individuals, and "a lot of these things are sent from anonymous locations," Norman noted.

Defamation laws do make some allowance for site owners and ISPs to be regarded as "innocent disseminators" if they were not aware of particular comments, but 2Clix has not invoked defamation laws in its claim.

The perils of "injurious falsehood"

Indeed, 2Clix's decision to use the relatively rare tort of injurious falsehood appears to be a direct consequence of recent changes to Australian defamation law. "Under the new act, corporations with a few very limited exceptions no longer have a cause of action in defamation," Norman said.

Those changes were designed to ensure that individuals could engage in robust debate and criticism of companies, without the threat of a lawsuit hanging over their head," Clapperton argued in the EFA statement. However, injurious falsehood suits provide a possible corporate alternative.

"There's been a lot more emphasis on injurious falsehood in the last couple of years," Norman said. "It's a tort that's been around forever, but rarely used until now."

A potential disadvantage of injurious falsehood for a plaintiff, however, is that it places a different emphasis on the truth of the matters under dispute.

"In defamation cases, it's more a matter of defence. A plaintiff in the defamation doesn't have to prove that the matter's false," Norman said. "In an injurious falsehood case, it is a necessary element of the defence and the plaintiff bears the responsibility to demonstrate the falsity of those statements."

Such demonstrations aren't always easily possible in matters of opinion. As Justice James explained in Gacic v John Fairfax Publications Pty Limited: "A statement can be the subject of a claim for injurious falsehood, only if it is capable of being true or false."

Some of the comments cited in 2Clix's statement of claim don't appear to be easily subjected to this kind of test. For instance, remark 5(a) -- "I would advise you to avoid this program at all costs" -- appears to be a statement of opinion. (If lawyers objected to individual remarks, 2Clix could file an amended statement of claim, although its action seeks to eliminate the threads in their entirety, not just the allegedly damaging remarks.)

As well as establishing the falsity of the contested remarks, 2Clix must also demonstrate that the defendant published with malice, and provide clear evidence of the economic damage created. "You have to show actual economic loss" such as downturn in business or a contract cancellation, Norman said. "That's a hard thing to prove. It is definitely a higher hurdle than a defamation case. But they've got no alternative as a company."

If the case does go to trial, the spotlight is likely to shine even more strongly on both 2Clix and Whirlpool, given the potential impact on all kinds of site operators. The EFA will be watching developments closely. "If the Whirlpool action goes to trial (which is by no means certain) we will consider making an amicus submission at the appropriate time," Clapperton told APC.

"EFA's position is that the law should treat online actions in the same way as offline actions. This doesn't mean that a forum operator is or should be liable for complaints that people make on their forum."

All major publishers in Australia will be watching the case closely. The legal precedent that would be created by 2Clix winning in court against Whirlpool would cripple the potential for publishers to develop their own online communities. Commercial publishers are increasingly growing their businesses around user-contributed comment and content.